The China Clean Tech Divide: Threat Or Opportunity? - Kerry A. Dolan - Shades of Green - Forbes
In the span of seven short years, China has taken the lead in solar panel production. In 2003, the country produced less than 1% of the world’s solar panels; this year over half the world’s solar cells and solar panels will be made in China. Some of that production is for North American companies like Canadian Solar, but among the fastest growing solar outfits are Chinese companies like Yingli Green Energy Holding and JA Solar Holdings.
That has translated into increasingly difficult conditions for folks like U.S. based solar company Solyndra, which shut down one of its factories in California –an older, less efficient factory, it said — early in November. One message board on the Internet puts it this way: “Solar Panel Production –China eats our lunch.”
The law firm Cooley LLP recently polled 125 clean tech entrepreneurs, investors and legal advisors about China and clean tech. The results show a relatively close division of opinion: 53% said the market opportunity in China outweighs the challenges of increased competition; 47% said that competition trumped the opportunity for potential growth. Gordon Ho, a practice leader in Cooley’s clean tech group, notes that Chinese solar panel maker Suntech recently began manufacturing in Arizona. “The China-U.S. clean tech efforts have been referred to as an arms race. But I see a lot more cooperation going on,” says Ho.
Two years ago Innovalight Chief Executive Officer Conrad Burke believed he would be competing against the likes of China’s Yingli as a large scale solar cell manufacturer. Then solar panel prices came tumbling down, changing the economics of production dramatically. Burke decided that his Sunnyvale, Calif. company needed to switch gears. “You can’t compete with [Chinese solar cell makers],” says Burke. “You have to have something that adds value.”
Innovalight makes an ink that, when printed on solar cells, increases the rate at which the cells convert sunlight into electricity by 1%; typically that means the conversion rate goes from 17.5% to 18.5%. (It sounds tiny but, as Burke explains, if you make 1 billion cells, it quickly adds up.) Instead of selling its own solar cells covered with its patented ink coating, Burke decided to sell the ink to solar cell producers. The buyers so far are in China. The venture-capital backed company has signed deals this year with JA Solar, Solarfun Power Holdings and Yingli. Innovalight manufactures its ink (Burke likens it to Coca-Cola’s secret syrup) in Sunnyvale and ships it to customers in China.
Burke sees the expansion of solar manufacturing in China as an opportunity –not just for his company, but also for large U.S. corporations as well. He calculates that approximately 60% of the cost of a solar module (solar industry jargon for “solar panel”) is materials; the rest is equipment, labor, overhead and the like. Burke estimates that U.S. companies like Dow Chemical, Dupont and 3M are major players in roughly 70% of the advanced materials used in making solar modules. He assumes that these U.S. companies have half the market for these materials, and are thus supplying about 20% of the value of solar modules.
Does that make China more of an opportunity for companies in the solar supply chain? Depends on where you are in that chain. If U.S. companies can figure out how to piggyback on Chinese production, the looming threat may indeed become an opportunity.
